Thursday, December 24, 2009

The War Over California - Ross Douthat Blog - NYTimes.com: "The argument about what went wrong with California is really an argument about the future of America. To the right, the Golden State’s ongoing crisis is a case study in liberal failure: A big-spending state that lived far beyond its means, and let its public-policy priorities be dictated by the appetites of liberal interest groups instead of the common good. To the left, it’s a case study in how a malign nexus of conservative intransigence and institutional sclerosis can thwart good governance. The problem in California isn’t the spending, liberals argue: It’s the supermajority requirements that prevent a liberal majority from raising the taxes necessary to pay for it."-----------------Why do people think California is the only state going under? Illinois isn't far behind California. Neither are New Jersey, New York, Michigan, Ohio, and a few others. If you take them all together, I think some common factors are obvious:

1. Federal unfunded mandates in education, health, and other social services can be devastating to state and local governments that have to serve a large low-income population. 2. States with powerful public employee unions have been forced into assuming crippling pension and health care burdens. 3. The major sources of revenue relied upon by state and local governments are political dynamite. Property taxation has been a source of voter revolt for 30 years. Sales tax increases drive business elsewhere and in any event these revenues decline in recession. And just begin the conversation about increasing state income tax and watch the fireworks. 4. And the neat little privatization and special district gimmicks that state and local governments have been using--CIDs, TIFs, SIDS, SADS, BIDs, etc.--are proving to be short term wonders and long term problems.

The recession made things worse, but a whole lot of states were already in big, big structural trouble.

5 comments:

I think it's much more broader based -- it's the baby boomers, the "me-first" generation, the self-indulgent generation. As discussed on MSNBC with Tom Brokaw, this generation had it too easy, has become soft, and never was prepared to deal with difficult times. It thought that "life is great!", and "Why worry?"

And these are the people now in political power and positions of responsibility!

"4. And the neat little privatization and special district gimmicks that state and local governments have been using--CIDs, TIFs, SIDS, SADS, BIDs, etc.--are proving to be short term wonders and long term problems."

This is why CIDs/HOAs are first and foremost expressions of fiscal policy. Local land use rules requiring all new residential development to be of the CID variety are the means to implement that policy.

The proliferation of CIDs is therefore not primarily an issue of housing, real estate/contract law or consumer protection from a policy/regulatory perspective. These are all secondary to the overarching fiscal policy direction that has been spurring the growth of CIDs in the U.S. over the past 30 years.

In the post about the Christmas lights choking incident, I noted my frustrations with my fellow conservative/libertarians about their indifference toward -- or even support of -- HOAs.

The more I think about it, the H.O.A. system -- as practiced, not in theory -- have a litany of villains and issues that should make conservatives and libertarians . Presented in no particular order as a brainstorming list:

1. The notion of "collective" property ownership. Some of the propaganda from the HOA lobby reads like it was written for Pravda, where everyone is happy in the collective-ownership paradise.

2. Double-taxation. As has been pointed out before, homeowners pay government taxes for services that they also have to pay the HOA for (e.g., road maintenance, street lights).

3, Never ending tax increases. Conservatives and libertarians are in favor of tax cuts (as am I). When was the last time HOA dues were ever reduced?

4. Taxation without representation. Here in Colorado, TABOR (TAxpayer Bill Of Rights) prevents governments from raising taxes without voter approval. Generally, conservatives and libertarians are pro-TABOR, while liberals blame TABOR for all sorts of problems. Yet HOAs can raise HOA dues -- a form of taxation -- without oversight.

5. Plaintiffs attorneys. Even Walter Olson's site OverLawyered.com barely mentions HOAs. It can't be for lack of material. Yet the legislatures and courts have created incentives for HOAs to engage in aggressive litigation, and non-judicial foreclose on homes for trivial reasons. I guess conservatives want tort reform to prevent individuals from suing corporations, but not the other way around (since HOAs are corporations).

6. Lack of property rights. As a homeowner in an HOA, you will never truly own your home. It will always be collateral to the HOA, even after the mortgage is paid in full. The laws have been written so that the interests of the HOA corporation -- collective ownership -- takes priority over the interests of individual property owners. In the Col. Barfoot case, it took the intervention of members of congress, the governor of Virginia, the White House press office, and nationwide publicity to force the HOA to back down. Yet Col. Barfoot voluntarily signed with the HOA corporation, and it would have been perfectly legal for them to take the colonel's home. Absent the publicity, they eventually would have.

7. Voter fraud. Even in the absence of outright fraud, with the HOA board of directors controlling all aspects of HOA elections and able to deny a homeowner the right to vote, how fair are they?

8. Lack of term-limits. Conservatives claim to support term limits, while liberals generally oppose them. So why do conservatives fail to recognize the corrupting effects and the unfair advantages of incumbency in HOAs without term limits?

9. Lack of competition. If an individual homeowner is unhappy with his HOA, the only way to replace it is to move. Let me use an analogy that even conservatives should be able to understand: If a worker is unhappy with his labor union (in a workplace where union membership is required), the only thing the worker can do is change jobs. Yet conservatives and libertarians who are reluctant to promote government interference with HOAs have no problem with government interference with labor unions (e.g., paycheck protection laws, which FYI I fully support).

With all of those factors -- and others I haven't thought of yet -- in place, how can such a system be sustainable in the long term?

It will eventually devolve into more regulation and (private) taxation of individual home owners, while putting the financial interests of the HOA corporation ahead of the owners of private property.

Conservatives and libertarians acknowledge the corrupting influence of concentrating money and power in government, yet fail to realize the long-term implications of doing so in a private corporation, even one with quasi-governmental powers.

About Me

I am a professor of political science at the University of Illinois at Chicago, and an adjunct professor at The John Marshall Law School in Chicago. Nothing contained in this blog represents the opinions of UIC or John Marshall, and nothing you see here is legal advice. You can reach me at ecmlaw@gmail.com